Everything about Tax Free Dividends: Tax Rates, TDS Rates & Limits

What Is a Dividend?

What Are Tax-Free Dividends?

What Is the Tax on Dividend Income?

What Are the Tax Rates on Dividend Income for Different Individuals?

The tax rates on dividend income vary depending on your residential status and the payout instrument of the dividend. The following table categories the tax rates:

Category of Investor

Nature of Dividend

Applicable Tax Rate as Per Income Tax Act, 1961

Resident Individual

Dividends received from equity investments in domestic companies

A normal tax rate applicable to the investor

Non-Resident Individual

Dividend received on shares of Indian company Sec 115A (purchased in foreign currency)


Non-Resident Individual

Dividend on Global Depository Receipt of Indian co./PSU (purchased in foreign currency)


Non-Resident Individual

Any other dividend income


Foreign Portfolio Investor (FPI)

Dividend received on securities other than units specified under Section 115AB


Investment Division of the offshore banking unit

Dividends on securities other than specified under Section 115AB


When to Tax Dividend Income?

What Is the Rate of TDS on Dividend Income?

What Is Advance Tax on Dividend Income?

What Are the Dividend Tax Rates in India for Non-Resident Indians?

FAQs about the Tax-Free Dividends

Is a dividend received from a foreign country taxable?

Yes, receiving dividend income from a foreign country is taxable. Such dividends are treated as income from other sources and are taxable at applicable rates.

What is the deduction of interest expense from dividend income?

According to the Finance Act 2020, it provides an interest expense from the dividend you have earned. The deduction should not be more than 20% of the dividend income, and you cannot claim any other expenditure deduction.

What is Dividend Distribution Tax?

Dividend Distribution Tax or DDT is a tax rate of 15% that companies have to pay when a company has paid, declared, or distributed any amount as a dividend. This was introduced in the Finance Act 1997, but it was withdrawn on 1st April 2020.